Before demonetization, ‘FinTech’ didn’t ring a bell amongst the Indian common masses. Today, it is a part of the popular lexicon. The reason behind it is very simple. The FinTech segment has addressed the need gaps that people struggled with for years and years – solving their challenges with a simple touch of a button. Then, it is natural for the segment to pique the interest of the people that it is catering to.
However, it is not just the existing use cases that amaze the common masses and industry veterans alike. The FinTech landscape continues to evolve rapidly with every year that passes. So, let’s have a look at some of the top developments that are taking place within the domain at present.
Neobanking has taken the world by storm. In essence, neobank is a digital bank that operates entirely online with no physical bank branches. But how does it make a difference?
Well, more people today prefer digital payments against cash transactions, especially in the wake of the COVID-19 outbreak. The banking processes – including everything from cash transfers to setting up FDs, RDs, and whatnot – are being done via mobile applications. While all of this happens, neobanks have developed a considerable edge against their traditional counterparts. Why? It is because, unlike typical banks, they don’t have to maintain extensive physical infrastructure on a national level. Hence, they save considerable operational costs. This benefit gets directly transferred to their customers in the form of cost-effective and more personalized services. It is why more people are going with neobanks now than the usual ones.
Though digital lending is nothing new for the segment, it is how this lending is being executed that is now making all the difference. For the uninitiated, the credit penetration in India is low amongst both retail and business segments (especially the MSME sector). The reason behind it is that the financial footprint in most cases is either insufficient or completely unavailable to make a credit decision.
However, this challenge is if we go by the traditional books. FinTech lenders have changed the grand scheme of things by tapping into alternate data. They have unlocked approaches that don’t merely generate credit decisions quicker despite the relative absence of traditional data. They are also more effective and do it with better accuracy than conventional methods. Hence, they achieve better results with lower NPAs.
Similarly, we are observing the rise of innovative products such as digital credit cards that enable UPI-based payments. They further charge no penalties or interest on cash withdrawals while also having superior rewards than offered by credit card companies.
Payments Services/POS Payments:
As more people go cashless, both card-based payments and digital payments are on the rise across our nation. In India, about 66.6 billion transactions totaling around $270.7 billion are projected to shift from cash to digital and card-based payments by 2023. Not many people are aware but these payments require unique and dedicated payment systems.
The increased pressure caused by the pandemic has already forced banks to modernize their payment systems. The need of the hour is to authenticate payments while making the entire experience more robust and seamless. It is where FinTech startups that act as payment processors and payment gateways are bringing about a sizable difference. A few innovative solutions have even brought down the authentication cost down to a quarter while also offering an express checkout feature with OTP-less and password-less experience.
Savings, Wealth Management, and Insurances
Gone are the days when people preferred to invest in FDs. They are aware now that such investment is not suitable to counter inflation. They are now turning towards better investment products such as stocks and mutual funds. FinTech platforms are doing their bit by making them more accessible, transparent, and cost-effective for people.
For instance, anyone can now easily invest in mutual funds including tax-saving ones such as ELSS while enjoying the touch-of-a-button experience. It can be done for as little as Rs 99 with the ability to withdraw even Re. 1. At the same time, dedicated wealth management applications are empowering people with financial awareness and enabling them to make informed investment decisions. Likewise, as the pandemic has gripped the world, insurances have also become much accessible with this FinTech approach.
In conclusion, as the masses become more digital savvy, the needs of consumers are being easily met via FinTechs rather than the traditional financial system. They are making people’s lives easy and are catering to a much larger population at the same time, thereby leading to superior financial inclusion. With a growing base of users, it will be interesting to see what else FinTech has in its bag for us.
The author, Zafar Imam, is CEO at Finshell. The views expressed are personal
(Edited by : Anshul)